Reciprocity in Contract Law

• Jurisdiction: South Africa
• Author: Andrew Hutchison
• Date: 16 August 2019
• Citation: (2013) 24 Stell LR 3
• Pages: 3-30
• Published date: 16 August 2019

3

RECIPROCITY IN CONTRACT LAW

Andrew Hutchison

BA LLB LLM PhD

Senior Lecturer in the Department of Commercial Law, University of Cape Town*

1 Introduction

A central idea in contr act law, around in some form since at least the ti me

of Aristotle (if not before) is the idea of commutative justice. One might

transpose th is to Latin and say that each is entitled to his quid pro quo u nder

a contract. In South A frican contra ct law we prefer to describe this conce pt

as the principle of “reciprocity”, while other legal syste ms might use instead

terms such as “mut uality” or “synal lagma”. Most bilateral contracts will

involve an element of exchange between the parties, with one p erformance

being given in retu rn for another. In such a state of affairs, performa nce (or at

least the tender of perform ance) by one party becomes condit ional upon the

right of the other part y to receive counter-performa nce. Since performance

by one party is condit ional upon performance by t he other, this entails a

concomitant right to wit hhold performance should cou nter-performance not

be given or at least tendered. In t he words of Jansen JA:

“Die grondslag van hierdie verweer [the exceptio non adimpleti contractus] is die erkenning daarvan

dat by sommige kontrakte (wederkerige kontrakte) waaruit wedersydse verpligtinge voortvloei, daar

wesenlik ’n uitruiling van prestasies beoog word, met oa die gevolg dat die een party nie verplig is om

sy prestasie te verrig nie alvorens die ander op sy beurt sy teenprestasie verrig…Gerieikheidshalwe

sal voortaan in hierdie uitspraak van die ‘wederkerigheidsbeginsel’ gepraat word, terwyl die reg om ’n

prestasie as uitvloeisel daarvan terug te hou die ‘weerhoudingsreg’ genoem sal word…”1

The question, however, is when can obligations be said to be reciprocal?

Corbett J suggested i n ESE Financial Servic es (Pty) Ltd v Cramer2 (“ESE

Financial Services”) that obligations were reciprocal when the per formances

of both parties repre sented “concurrent cond itions”, in other words where a

simultaneous exchange wa s envisaged.3 An example of this scenar io would be

the exchange of the merx for the purchase price u nder a cash sale.4 Al te rn at ive ly,

one performance m ight be the “condition precedent” for the othe r – such as

where an independent cont ractor must complete his work in f ull before the

* The author would l ike to express his than ks to his father, Professor Dal e Hutchison, to Professor Jaco

Barnard- Naudé and to the anony mous reviewers for the ir comments on a dr aft of this paper

1 BK Tooling (Edms) Bpk v Sco pe Precision Eng ineering (E dms) Bpk 1979 1 SA 391 (A) 415H per Jansen JA:

“The basis of th is defence is the acknowledgem ent that with certai n contracts (reciprocal c ontracts)

from which rec iprocal obligati ons flow, an exchange of p erforman ces is intende d Amongst other

things, th is has the consequenc e that one party is not obli gated to tender his per formance unless t he

other perfor ms in return… For t he sake of convenience thi s will be termed th e ‘reciprocity princ iple’

from here on in t his judgment, while th e right to retain perfo rmance which flows f rom this, will be

termed the ‘r ight of retention’…” (own translation)

2 1973 2 SA 805 (C)

3 808H-809A

4 808A

(2013) 24 Stell LR 3

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employer is obliged to counter-perform.5 Whet her performances u nder a

contract fall into eithe r of these categories is thus a question of inter pretation

of the contract in question.6 I nterpretation would also determine t he sequence

of performance required.7

If reciprocity then refers to a st ate of affairs where the per formance and

counter-performance of cont ractual obligations are conditionally lin ked, then

the concomitant right of such a par ty – as stated by Jansen JA in BK Tooling

(Edms) Bpk v Scope Precision Engine ering (Edms) Bpk (“BK To olin g”) above

– is to withhold performa nce should counter-performance not be forthcom ing.

This weerhoudingsreg (or right of retention) is a self-help mechanism in South

African cont ract law, which is given effect to by a defence with the historical

name of exceptio non adimple ti contractus.8 This is a si mple contractual

device by which a party to a re ciprocal contract may refuse to perform shou ld

his counter-part y not perform and sta nds therefore as a potential defence to a

claim for specic performa nce.9

The statement of the law so far is est ablished in the historical sources a s well

as in the judgments of the App ellate Division (and later the Supreme Court

of Appeal). The problem is that this bald restat ement fails to take accou nt of

all the nuances of possible factu al problems which have been thrown up over

the course of histor y. What follows is an attempt to shed light on some of the

major problems which have faced past courts , in this countr y and others, in

resolving disputes involving reciproca l obligations. Once a right to with hold

performance is re cognised, an im mediate inquir y must take place as to

whether that retention is just ied and whether the principle of reciprocity is

served or under mined by upholding the refusa l to perform. Ulti mately many

of these questions involve issues of what is fair inter partes – a consideration

which has led to several glosses on the basic r ules stated above.

This art icle will proceed in par t two to discuss the histor ical origins of the

concept of reciprocity in contr act law. From there, in part th ree, the notion of

reciprocity in the conclusion of a contrac t will be considered, again th is section

will be largely historical. Par t four will give an accou nt of the concomitant

doctrines of specic performance and exceptio non adimple ti contractus.

These concepts will b e dealt with historically a nd comparatively, but with a

special focus on South African law. Part ve will deal with issues of reciprocity

involved when a contract is repudiated, p art six with the consequences which

reciprocity entails for par ties following the termination of a contract , whether

through breach or bec ause it is voidable. Finally part seven will deal with t he

difcult issue of divisibilit y of obligations or performances in contract law,

while part eight will c onclude.

5 808A-B

6 ESE Financial S ervices (Pty) Ltd v Cram er 1973 2 SA 805 (C) 809H-811A; BK Tooling (Edms) Bp k v

Scope Preci sion Engineering ( Edms) Bpk 1979 1 SA 391 (A) 418B-C

7 BK Tooling (Edms) Bpk v Sco pe Precision Engin eering (Edms) Bpk 1979 1 SA 391 (A) 418C-E

8 415H- 416A

9 See the discu ssion of BK Tooling (Edms) Bpk v Sc ope Precision E ngineering ( Edms) Bpk 1979 1 SA

391 (A) in part 4 3 below and for fu rther details, S v an der Merwe, LF van Huys steen, MFB Reinec ke &

GF Lubbe Contract: General Principles 3 ed (2007) 388-391; RH Chri stie & GB Bradfield The La w of

Contract in S outh Africa 6 ed (2011) 437-440

4 STELL LR 2013 1

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